U.S. Stocks Rise As Buyers Find Bargains; Dow Up Triple Digits

NEW YORK (MarketWatch) -- U.S. stocks advanced firmly higher Thursday, with the Dow industrials climbing more than 100 points, as bargain hunters returned to equities, which were discounted after three days of losses.

"There are a lot of deep discounts, and value buyers are out there," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.

"Historically, stocks are priced at 18 to 24 times earnings, and stocks are priced at about 14 to 15 [times earnings] right now; when you look at those numbers, there is a compelling reason to buy stocks," he added.

In choppy trading, the Dow Jones Industrial Average climbed 124.1 points to 12,324.2, with 24 of its 30 components trading higher, led by Home Depot Inc. , up 5%.

Fronting blue-chip declines was Hewlett-Packard Co. , shares of which recently were off 1.8%.

Also among the blue chips, shares of Wal-Mart Stores Inc. turned heel on earlier declines, climbing 2.1%. The company was among a slew of U.S.-based retailers reporting a miserable start to the year. .

"The Cisco earnings and weaker than expected Wal-Mart sales were the early downside catalysts," said Elliot Spar, option/market strategist at Stifel Nicolaus & Co.

The broader indexes also advanced.

The S&P 500 Index gained 17.80 points to 1,344.25, while the tech-heavy Nasdaq Composite Index rose 31.89 points to 2,310.64 -- after earlier entering bear-market territory, down more than 20% from its end of October peak.

Down earlier on, Cisco Systems Inc.'s shares gained 1.3%, after the networking giant forecast 10% revenue growth in the fiscal third quarter, against the 15% growth rate that analysts had expected. The company's profit for the latest quarter rose 7%.

"What began as a slowdown in the U.S. in the second quarter is now spreading, as both U.S. and Europe saw unexpected softness in January," according to Richard Windsor, analyst for Nomura International. "This is particularly troubling as North America and Europe make up 70% of [Cisco's] revenue."

Microsoft Corp. also gained, up 0.3%, as the software giant awaits word from Yahoo Inc. on its $44.6 billion acquisition bid. Shares of Yahoo were up 1.8%. .

"The more you see the risk-arbitrator guys come in and deals being done, people start making assumptions of what is the next group to be bought," said Conroy.

Information-technology services provider Electronic Data Systems Corp. sank 7.3% in the aftermath of lackluster fourth-quarter results reported after Wednesday's close.

Volume on the New York Stock Exchange topped 1 billion shares, with advancing stocks edging ahead of those declining more than 2 to 1. On the Nasdaq, nearly 2 billion shares exchanged hands, and advancing stocks topped decliners nearly 2 to 1.

On Wednesday, stocks closed with losses for a third consecutive day after a Federal Reserve official indicated that inflation worries could serve to limit future interest-rate cuts.

Crude moves

In commodities, crude futures also reversed course, erasing earlier declines, as the benchmark contract traded up 91 cents at $87.05 a barrel on the New York Mercantile Exchange. .

Gold futures for April delivery gained $5.5 to $910.5 an ounce. .

Other Thursday data included a report from the National Association of Realtors, which said sales of existing homes fell 1.5% in December, marking a second monthly drop. .

"The data are worse that forecast, but not really a surprise as the housing market remains weak and looks to remain so through at least midyear, with many economists not seeing much stabilization until later this year," said analysts at Action Economics.

Before the opening bell, the Labor Department announced that first-time jobless claims fell last week but also revised the prior week's count higher, with continuing claims stood at their highest level in more than two years .

"The average monthly consumer-credit numbers are falling but delinquencies are rising. This is not the stuff that economic rebounds are made of. This is the stuff recessions are made of," said Kevin Giddis, managing director in charge of fixed income at Morgan Keegan & Co.

Rate moves

Overseas, the Bank of England cut interest rates by a quarter-percentage point to 5.25%.

The move came in reply to "slower consumer spending and a weakening housing market," said Wachovia Corp. analyst Jill Trainor.

The European Central Bank, however, held its key rate steady at 4%, with ECB President Jean-Claude Trichet telling a news conference that while data have confirmed the bank's view that economic risks are weighted to the downside, inflation remains the key concern.

By Kate Gibson